The market of electronic appliances has grown drastically in the last few years, and Best Buy Co., Inc. is using it to turn things around.
Just a couple years ago, there were reports that Best Buy—the biggest electronics chain in the US—was facing bankruptcy. Due to the growth of various online stores like Amazon, the sales of Best Buy stores had declined, and many analysts suspected that the chain might shut down soon. But today, the scenario has reversed. The company has shown growth in sales in the last year and is planning to expand. The reason for this change was explained by the CEO of Best Buy in a recent interview.
Hubert Joly, the Chairman and CEO of Best Buy, took over his predecessor in August 2012. The company at that time was hardly able to keep up. With its 1,400 stores around the country and too many employees, it was hard to keep things running. Consumers were getting so many options online—and home delivery for free—that no one wanted to run to a store anymore. To tackle this issue, Joly engineered a turnaround plan for the company. It consisted of three phases, the first one being “Don’t die.” It was just about keeping up with expenses and running the company at all costs. The second phase was to improve what they had, and the final phase was to grow.
Hubert Joly in an interview said, “We have completed the first two phases of the turnaround plan, and now we are in position to look towards the future and find new ways to grow.”
While most retails chains in the country have shown a decline in sales, Best Buy has managed to feature an increase. It has shown a rise of about 15% in its earnings per share in the last quarter. And the main credit goes to home appliances, which is the fastest growing segment within the retail store chain. Best Buy had 10% of its sales through appliances in the fiscal quarter that ended on the 1stof August of this year. The sale of appliances was just 5.3% a few years ago. The “per square foot sales” of the company have gone up from $780 in 2010 to $870 in 2014.
This did not happen on its own. Best Buy made several changes in their strategy to bring about this increase in sales. The biggest change of all is that its stores now have separate sub-stores for kitchen appliances and other electronic items. About 50% of customers end up purchasing something. The rate was only 32% a few years ago. Now, in the final phase of its plan, the company is planning to increase its share in the high end appliances market with the help of renowned brands like Samsung, Whirlpool, and LG.
“It is a growing market, and our share in it has been quite low. Thus, there is a significant opportunity for growth,” Joly said in the interview.